The suspension of the Petroleum Industry Bill by the National Assembly to go on recess stalls investments and draws the ire of industry stakeholders, as they advise the legislators to cut short their vacation and attend to the bill
Even before the Petroleum Industry Bill, PIB, was formally presented to the National Assembly, NASS, last month, the legislators had given assurance that it would be accorded speedy consideration. Ajibola Muriana, chairman, House of Representatives Committee on Upstream Sector, who decried the lull in investment in the oil and gas industry due to continued delay in the passage of the PIB, assured that it would be considered expediently once it was passed to them. “We all know the implications of the bill not passed into law. However, we are told that those areas of contention are about to be resolved. So I can assure you that the bill, once presented to us, definitely, within the next two weeks or one month, we will do justice to it,” Muriana had stated.
But contrary to this promise, the Lower House made a U-turn, virtually retuning the bill to President Goodluck Jonathan because they were already billed to go for a two-month vacation. Even Femi Gbajabiamila, House Minority Leader, appealed to his colleagues to return the all-important bill to the President for re-presentation when they resume mid-September from their vacation. For Ita Enang, the chairman, Senate Committee on Rules and Business, there was an assurance that the Upper House would be reasonable while addressing the PIB. “We will be very reasonable in our consideration of the bill knowing the importance that it has in investment in the petroleum sector. We will be reasonable in the timing and consideration,” he also assured.
Like the infamous Roman Emperor Nero who played the fiddle while Rome burned, members of the NASS collected copies of the bill and went on vacation while the oil and gas industry, the cash cow of the national economy, bleeds. This development has incurred the fury of stakeholders in the industry who insist their action is only symptomatic of their greed, insensitivity and total disconnectedness with the yearnings and aspirations of the electorate. Isaac Aberare, general secretary of the National Union of Petroleum and Natural Gas workers of Nigeria, NUPENG, says the legislators did not show enough patriotism by not attending to the bill as if they will not go for Christmas vacation. To him, since the bill is at the centre of the national economy, the legislators ought to have given it the first and second reading and allow it to go to the committee stage before considering going on recess.
Babatunde Ogun, president, Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, says the lawmakers need to make some sacrifices, including forfeiting part of their vacation to legislate on bills currently in the National Assembly. Ogun described the action of the legislators as a mark of gross insensitivity to the Nigerian people and lack of appreciation of the criticality of the oil industry to Nigeria’s economy, lamenting that the lawmakers prefer luxuriating in fashionable capitals of the developed world to sitting down and legislating on the bill considered so critical to the national economy. “Like Nero, our lawmakers think it is more important to fiddle while important issues lie unattended. If our ‘honourable’ members were concerned about the state of the oil industry, the engine of the Nigerian economy, they would have known that no new project has been sanctioned in the industry since PIB was first proposed in 2009,” he said.
Ogun and Aberare have valid reasons for their position. It is believed that if the PIB is passed, it will increase government’s revenue to more than N105.4 trillion (US $680 billion) annually. The continued delay of the bill has also stalled investment in the sector. Oil industry operators have stated that over $50 billion of potential investments have been put on hold over the non-passage of the bill even as it has compelled indigenous companies, which are service providers, to reduce their workforce by about 80 per cent to reduce operating cost. This is because the international oil companies, IOCs, who are the mega investors in the industry, would rather base their investment decisions on the fiscal and regulatory terms of the bill after its passage. Even though they are on recess, the lawmakers have indicated that the bill will not get a speedy passage but a thorough passage and hinted that they would make major changes in the bill.
Anthony Goldman, chief executive officer of London’s PM Consulting, says the pendency of the bill has taken a toll on investment in the nation’s oil and gas industry. “(It) has already forced the government to abandon a lucrative oil licensing round. Investment in new projects in the sector more generally has been constrained; ambitious plans for $80 billion integrated gas gathering and processing system remain exactly that: ambitious plans,” he said. It is estimated that up to $120 billion in oil and gas industry investment, largely by Royal Dutch Shell, Total of France, and US oil major, Chevron, had been stalled because of the bill.
With many other African countries discovering oil, there are concerns that they would be attracting FDIs at the expense of Nigeria if the country fails to put its acts together. A recent report by Renaissance Capital noted that Ghana, which is Africa’s newest oil producer, drew FDI for the newly developed Jubilee oil field, while Tullow Oil, a UK oil company, plans to invest $2 billion (in 2013 and 2014) to establish an oil refinery in Uganda. Nobile Energy, a US oil company, also plans to invest $1.6 billion to set up production wells and a processing platform in Equatorial Guinea, the report said, making no mention of fresh investments in Nigeria’s oil and gas sector.
Akin Odumakin, managing director, DeltaAfrik, one of the few indigenous players in the industry, lamented that the bill has delayed the execution of key projects in the industry with multiplier effect on service providers. “Bids and proposals from service providers that positioned to participate in the development of major deepwater fields in Nigeria have also stalled with the projects as investors prefer to halt activities and wait for the fiscal terms to be certain,” he said. He identified two deepwater fields – the Bonga Southwest and Egina fields – as projects awaiting the passage of the bill. While the former is operated by Shell Petroleum Development Company, SPDC, French oil giant, Total, operates the latter.
While the final investment decision on Egina is still waiting for fiscal terms of the bill, Shell has also put the development of Bonga Southwest on hold following a sharp disagreement with government over the fiscal changes in the bill. In May 2001, SPDC drilled an exploration well on Bonga Southwest located some 10km South-west of the Bonga field in water depth of 1,245m. Bonga Southwest reached its final depth of 4,160m and was subsequently logged and suspended though it encountered a substantial amount of net oil sand. An initial evaluation of the well results indicated that the recoverable reserves discovered with Bonga Southwest were large enough to form the basis for a new deepwater development in oil mining lease, OML, 118.
Located 150km off the coast of Nigeria, the $2 billion Egina project in which Total has 24 per cent stake plans to open tender covering various packages while plans to sign the contract is by year end with a view to commencing production from 2015. Bid documents will be issued to shortlisted contenders for building new floating production, storage and offloading, FPSO, vessel, subsea umbilicals, risers and flow lines as well as a subsea production system. A substantial part of this project will go to indigenous firms in the spirit of the local content law.
But the legislators that will make all these happen are junketing across the globe much to the anger of Nigerians who are irked by the fact that the legislators get so much and give so little in return to the nation. Four times this year, each of the 360 members of the House of Representatives will receive N35 million as constituency allowance, amounting to N140 million every year. Each of the 109 senators, on the other hand, collects N48 million per quarter, amounting to N192 per year. These benefits they enjoy in addition to their salaries, allowances and other appurtenances of office.
Analysts say because a bill must pass through several stages in both Houses of the NASS to become a law, it would have made so much sense if the legislators had begun deliberations on the bill. Aside first reading (introduction of the Bill without debate), second reading (general debate), the bill will still go through committee stage, then to report stage (opportunity for further amendments). It goes through third reading (final chance for debate, while the last stage is presidential assent.
The necessity to pass the bill on time is also underpinned by the fact that crude oil is no longer a monopoly of Nigeria, as other African countries have made huge discoveries too. Kenya recently announced for the first time an oil discovery in the Lake Turkana region in the North-east of the country, becoming the third oil producer in East Africa following Uganda and Tanzania. Africa boasts enormous oil resources, with traditional oil-producing countries mainly in North and West Africa, including Angola, Congo, Equatorial Guinea, Gabon, Sudan and Chad. In recent years, some countries in East and West Africa, including Ghana, Liberia and Sierra Leone, have discovered large oil reserves and joined in oil production. Vast natural gas resources have also been discovered in South Africa. In February 2010, large natural gas resources were discovered in Mozambique offshore and substantial natural gas resources available for commercial exploitation were also discovered in Namibia and Botswana. Foreign investments have flowed to these new players. Fears are that the discovery of a new offshore oilfield in Angola, a traditional oil-producing country, may displace Nigeria as the largest oil producer in Africa. Aside this, oil exploration in Madagascar, Seychelles, Ethiopia and Somalia is under way. So, playing Nero at this time by the lawmakers is surely not in the best interest of the country.
However, Femi Falana, a senior advocate of Nigeria, SAN, and Philip Jakpor, head of media, Environmental Rights Action/Friends of the Earth Nigeria, ERA/FoEN, are not concerned about delay in the passage of the bill but whether it meets the expectation of Nigerians. Jakpor is rather worried that the bill does not address key environmental issues and the concerns of communities impacted by oil activities. “Nigeria has lost 1/3 of her GDP or nearly $90 billion through gas flaring in the past 35 years. It is shocking enough that Nigeria flares more gas each year than Germany’s total energy consumption. So, to us, advocating another transition period on ending gas flaring as is espoused in the current PIB is anti-environment and anti-people,” he said.
But Diezani Alison-Madueke, petroleum minister, thinks otherwise. According to her, when the PIB is passed into law, “It is expected that gas will be the next area of explosion for the country and it will take over from crude oil because Nigeria is actually a gas nation considering the enormous gas reserves we have.” She assured that there is a robust plan for the commercialisation of gas resources to serve as feed stock for industry and not just gas for power generation, adding that there is arrangement with Nagarjuna of India and Xenel of Saudi Arabia to establish fertiliser and petrochemical plants and a central processing plant to make gas the fulcrum of industrial development in the country. But all these, too, will depend on when and how the legislators treat the oil bill.